Revamp global finance structures

FROM THE UN - Anjali Sharma

Joseph Stiglitz, chairman of the panel of experts on reforms of the international monetary and financial system, described the panel’s recommendations in the General Assembly.
The panel released wide-ranging recommendations ahead of the final report to be tabled in the June conference on the impact of economic meltdown.
It said that the international finance structures must be drastically overhauled to deal with the current global economic crisis, as it called on wealthier nations to direct one per cent of their economic stimulus packages to help developing countries address poverty.
The panel of experts, commissioned by the president of the General Assembly, is proposing far-reaching changes in international finance structures and strong measures to overcome the current economic crisis.
It recommended that one per cent of developed-country stimulus packages be directed to the developing world to fight poverty and build global demand.
Mr Stiglitz said that while a coordinated stimulus is required for global recovery, many poorer developing countries lack the requisite resources. He stressed that many poorer countries lack the resources necessary to tackle the crisis, and developed nations should not attach inappropriate conditionalities to such funds.
“The nature, the severity of this crisis has really opened up opportunities for change for reform that I think would not have been conceivable even a few months ago,” Mr Stiglitz told reporters.
The experts also called for the IMF to increase the availability of funds for hard-hit nations.
The panel proposed a number of additional sources, including an immediate issuance of Special Drawing Rights and supports regional efforts, like the Chang Mai initiative.
It emphasised that such funds should be provided without the inappropriate conditionality often associated with such assistance.
The panel also advised enactment of an approved IMF measure to double SDRs to hard-hit countries, up to SDRs 42.8 billion.
It has proposed an overhaul of the current system of global reserves to the world economy get back on its feet, and to guard against a repeat global financial debacle.
The commission said that a new global reserve system possibly based on greatly expanded SDRs, could contribute to economic stability and equity.
It would reduce the deflationary effects of the massive reserve accumulations that countries have found necessary to protect themselves against the high level of global instability.
Such a system is “feasible, non-inflationary and easily implemented”, and counteracts the risk of a rapid fall in the value of a major reserve currency, gutting hard-earned reserve funds, Mr Stiglitz told reporters at a Press conference.
GA President Miguel d’Escoto Brockmann empanelled the Commission of Experts in response to the downward spiral in the world economy.
These recommendations were considered at the Thematic Interactive Dialogue on the global financial crisis that ended in New York on 27 March. Various national representatives, UN officials, experts and civil society stakeholders participating in the three-day meeting.
The following are the recommendations by the commission:
i) An elected and representative Global Economic Coordination Council, within the UN system, to meet annually at Head-of-State level to assess developments and problems, coordinate policies, and lend leadership on social and environmental as well as economic concerns. Such a body would provide “a democratically representative alternative to the G-20”.
ii) A Global Financial Regulatory Authority and a Global Competition Authority, accountable to the Coordination Council, under more broad-based governance than the current Financial Stability Forum, to oversee global financial stability, prevent regulatory arbitrage, harmonise regulations, and prevent the growth of multinational firms that represent a threat to competition or pose a problem having become too big to fail.
iii) A new international credit facility that could provide additional credit to developing countries without pro-cyclical conditionality, and whose governance would be both more representative of the new donor countries and more sensitive to the concerns of the developing countries.
It might be most rapidly opened under the umbrella of the World Bank, where efforts are already under way to remedy inadequacies in governance and lending practices, or in regional development banks, where developing countries enjoy more equitable representation.
Focus on specific clashes: Alliance of Civilisations has announced its second campaign for understanding cultures and said that its purpose was to help reconcile specific communities, not to resolve political conflicts or divisive issues.
Director of the forum Marc Scheuer said the overall aim is “to help reduce tensions across cultural divides that threaten to inflame existing political conflicts or trigger new ones,” as he previewed the Forum which is scheduled to take place on 6 and 7 April in Istanbul.
“The Forum will be about that dialogue that delivers, focusing on concrete situations and trying to change the situation on the ground,” he added.
He said this second Forum will bring together religious leaders, governments, philanthropists, representatives of corporations and the media, academics and activists.